Rochester & Rochester Hills Market Update February 12,
What Happens if the Seller needs to Occupy the Home After Closing?
Whether you are the Buyer or the Seller, you need to understand how post-closing occupancy will be handled. In your Purchase Agreement there is a paragraph that outlines the number of days Seller has occupancy after closing and the daily rate. Some Realtors simply state that the daily rate is PITI, which stands for Principal, Interest, Taxes and Insurance. In other words, the Seller will pay whatever the Buyer’s PITI amount is for each day the Seller remains in the home after closing. I prefer to have an actual amount agreed upon before accepting a Purchase Agreement so that this amount is not open-ended.
The PITI can fluctuate quite a bit depending on the Buyer’s mortgage amount which is directly related to the down payment, loan interest rate, property tax on the home which adjusts with a new buyer and and may be estimated, and homeowners’ insurance. The daily occupancy rate is based on that monthly amount divided by 30 (days in the month). For instance, if the Buyer’s monthly PITI is $1,800.00, that amount divided by 30 equals a daily rate of $60.00. At closing, the title company will hold in escrow a portion of the Seller’s proceeds to pay for post-closing occupancy.
Some Purchase Agreements state that the amount held will actually be 1.5 x the occupancy rate to account for stay beyond the agreed upon time period and/or certain damages. In the above example, $90.00/day would be escrowed. If the Seller does not occupy all of the days agreed upon, the title company will prorate the escrow amount and will refund the Seller along with any extra monies held.
Check your individual Purchase Agreement for how post-closing escrow is distributed if the Seller does not vacate the property in time, or if there are any damages to the property during post-closing occupancy.
When the Seller does vacate the property, keys will be exchanged between the two parties which can be handled with or without the assistance of the involved Realtors. A Key Exchange Form will be signed by both Buyer and Seller and that form will then be sent to the title company who then distributes the escrowed funds. If post-closing occupancy exceeds 30 days, the title company will distribute the first month’s funds due to the Buyer if desired, so the Buyer can make the mortgage payment. Utilities are the Seller’s responsibility until possession goes to the Buyer. One last thing to mention, standard practice is that the Seller pays the Buyer’s PITI for occupancy after closing, but all terms of the Purchase Agreement, including post-closing occupancy charges, are negotiable.
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Never before has it been as important to work with a knowledgeable Realtor during your real estate transaction. Today's housing industry is more complex, and requires the guidance of an educated prof....